Chapter 1 EIR Recast Background

• Jurisdiction: United States

1. EIR Recast Background

1.1 Introduction

The European Insolvency Regulation No. 1346/2000 of 29 May 2000 (EIR 2000) entered in force on 31 May 2002 and was the first major instrument dealing with cross-border insolvencies in the European Union (EU). It took more than 30 years for the EU to agree on a harmonized regulation of cross-border insolvencies. The adoption of unified rules on matters of international insolvency jurisdiction and applicable law was determined by the need to improve the efficiency and effectiveness of insolvency proceedings having cross-border effect, ensure equal treatment of creditors (pari passu principle), and protect legitimate expectations and certainty of transactions. The overall idea underpinning the EIR 2000 was the unity and universality of main insolvency proceedings opened in a state where the debtor has its COMI. This will also be the jurisdiction to handle most of the insolvency-related issues under domestic insolvency law (lex concursus).

According to Article 46 EIR 2000, no later than 1 June 2012 the European Commission had to present a report on the application of the EIR 2000 with a proposal for its adaptation (if necessary). Despite the general acknowledgement of the EIR 2000's success, after 15 years of its existence, it has become clear that some of its provisions needed adjustment, while other developments required totally new rules. As a result, a new insolvency regulation was adopted in 2015, the European Insolvency Regulation (recast) No. 2015/848 (EIR Recast). This new EIR Recast entered into force on 26 June 2017, thus replacing the original EIR 2000.

The need for a renewal was based on the European Commission's identification of five main shortcomings of the EIR 2000 that it urged to address:

• The EIR 2000 did not, in principle, cover national procedures that provide for the restructuring of a company at a pre-insolvency stage ("pre-insolvency proceedings") or leave existing management in place ("hybrid proceedings"). It also frequently excluded proceedings that dealt with over-indebtedness of private individuals and self-employed persons, particularly when such proceedings left management in full control over the debtor's assets or did not provide for the appointment of an insolvency practitioner;
• The application of the ground rule of international jurisdiction of a court, i.e., center of main interest (COMI) of the insolvent debtor, has given rise to much controversy. The abusive forum-shopping

...